Wealth Management Strategy Amidst Covid-19

The pandemic began in 2019 and put screeching brakes on our habitual manner of living. The phrase “survival of the fittest” aptly encapsulates the prevailing way of life. These trying times have also put to the test one’s financial fitness and ability to sail through financial hardships. 

So, here are some strategies to shore up your financial well-being during the ongoing pandemic. 

Wealth Management During Covid-19

• Use Evidence-based Practice To Manage Your Portfolio

When investing, it is advised to harness evidence-based strategies that will most likely deliver your desired returns while minimising risks. These call for you to create a mix of bond and stock asset classes, periodically rebalancing the asset allocation to keep it on track, and/or tweaking your portions if your goals have changed. Moreover, you should identify ideal holdings to achieve all of these, alongside structuring your investment portfolio for tax efficiency. 

• Stay The Course

“A long-term strategy is self-correcting” stands as one of the basic rules for investing. If you have a wealth management strategy that is founded on evidence-based financial principles, it is best if you stick with it for the long haul. Sound investments build a low-cost and diversified portfolio structured to strike a balance between risks and expected returns. Such an investment represents your best shot at accomplishing financial goals. So, stay the course, in good times or bad.

• Check In On Your Emergency Fund

Now is a good time to realise how helpful it is to have a rainy-day fund and how alarming it is not to have enough. So, use your time to set up a disciplined procedure to replenish or add to your fund. You can opt for an “auto-debit” option so that a monthly direct deposit from your bank account goes into cash reserves.

• Build A Personalised Financial Plan

There is no better time than now to tend to your personal finances. Consider having a talk with your wealth advisor or financial planner about retirement planning, insurance coverage, tax planning, estate plans, business successions, beneficiary designations, as well as your child’s future, to name a few. In this manner, you can devise concrete methods to strengthen your financial well-being instead of fixating the uncertainties that accompany this pandemic.

• Avoid Stock-Picking And Market-Timing

Why do share markets ratchet upwards during a socioeconomic turmoil, such as the present-day pandemic? 

Market theory answers this question by way of several rational explanations. Typically, market prices undergo resets based on the “what’s next” expectations. On the other hand, the economy is based on “what’s now” realities. Therefore, a pursuit to keep up with the market’s frantic moves will lead you nowhere, especially when investing during Covid-19. And an attempt to do so can waste your time.

• Do Not Stretch For Extra Yield

Investors must always focus on building adequate cash reserves. However, some investors cannot help but fall for the holdings that offer higher yields with similar levels of associated risks. This strategy does not consider the fact that risk and expected returns are intertwined. So, it renders them riskier when you stretch the safety net of stable holdings for higher yields. Therefore, if you come across an enticing investment pitch that downplays risks yet talks up returns, you may consider giving it a pass. 

• Refrain From Playing The Market

Some investors pursue the “get rich quick” schemes, thus exhibiting an interest in volatile markets, stock options, and day trading. However, evidence suggests that it is better to engage in efficient markets patiently instead of endeavouring to beat them by way of risky and concentrated bets. Furthermore, over time, playing the markets turns out to be a losing strategy for your wealth.

• Do Not Bailout

This wealth management strategy goes back to “staying the course”. While young investors are interested in “playing the market”, retirees are often tempted to abandon the market altogether. However, this move comes with its risks. Let’s say you plan on augmenting your retirement income by way of inflation-bustling market returns. Here, the ideal way to earn them is by sticking to your plan. Most of the market’s best returns take place when they are least expected. Therefore, it is wise to wait till the coast seems clear. 

Moreover, when changing stock positions, early retirees cannot afford to underestimate sequence risk. It refers to the mistiming withdrawals, which can cost more and reduce a portfolio’s overall returns.

In case investors retire in a bull market, their account may grow considerably large to endure a subsequent downturn. On the other hand, their account balance may never recover if they retire in a bear market. 

Here, you can employ dynamic spending rules. It is a wealth management strategy that allows you to distribute up to 4% in your first year of retirement while freezing increases or decreasing your annual distributions during bearish markets.

Bottom Line

Although the future is hard to predict, investors can take steady steps towards wealth management during Covid-19 in a bid to secure their investments. Like the ones discussed above, certain strategies can mitigate the associated risks of investment so that your financial well-being is never on the line. However, employing the aforesaid strategies is a tall order for novice investors. Herein, you can resort to portfolio management services to have your wealth efficiently managed.